Every
organization reaches its goals by utilizing its assets. And if it is responsibly
managed, it keeps a running account of those assets, typically representing
them in monetary values.

This
form of representation is universal and, indeed, necessary. But it can also
be a subtle form of hypnosis that leads to the erroneous—and potentially dangerous—assumptions
that all assets are monetary and that money is the “first cause” in the chain
of events propelling an organization to its goal.

In reality,
money is not the first cause. Other, intangible assets are more fundamental
still. Among these are imagination and goodwill. With a bit
of reflection we can see that this is so.

It is not
unusual for a new organization, especially a nonprofit organization, to start
out with large amounts of imagination and goodwill, but little or no money.
Still, if the organization is resourceful it can leverage these intangible assets
into a financial base.

A
good example is the American Composers Forum, the country's largest service
organization for classical composers. The Forum was started in the 1970s with
great imagination on the part of its founders and equally great goodwill on
the part of many professional musicians—who performed gratis on its early concerts
simply because they enjoyed the comradeship.

These intangible
assets were utilized to very tangible ends. The organization established a
track record of performances, which it then leveraged to secure the financial
backing of foundations, corporations, and individuals.

The kind
of goodwill that the Forum had was, of course, the “cheerful readiness” kind
(not the “excess of cost over book value” kind). Had the Forum been short on
“cheerful readiness,” its founders’ dream probably would not have materialized.

Now this
hints at an interesting, but rarely acknowledged, relationship: An organization's
financial condition at one point in time is a function of its imagination and
goodwill at an earlier point in time.

Because
of this relationship, it is sometimes the case that an organization's current
financial picture will look quite good, while its current accounts of imagination
and goodwill—accounts that will shape its future—are declining undetected.
This can happen when an organization uses an incomplete monitoring system to
track its resources.

To evaluate
itself and steer itself into the future, an organization studies its past behavior.
And since it can only study behavior that it remembers, it sets up a record-keeping
system to document its actions.

Every system
is a set of categories. The categories direct attention to particular things
and relationships. The most prevalent system, of course, is the financial accounting
system—a framework where various monetary actions and relationships are easily
entered and retrieved.

Items that
don't fit into one of the categories often slip through the cracks. When an
organization’s monitoring system contains only financial categories, the organization
is likely to lose sight of important non-financial assets.

Imagination
and general goodwill are just these kinds of assets. Usually there is no formal
system to monitor them. They are only informally noted in the memories of people
directly involved. That makes them difficult to track. Were the entire personnel
of an organization to change, the history of its financial assets would remain
in its ledgers for everyone to see. Not so with intangibles. Every time an
involved person leaves an organization, it loses some of its informal accounting
of these assets.

Intangible
relationships are subtle and elusive. On the other hand, financial relationships
are not. They’re easy to record, photocopy, and pass around for everybody to
look at and comment on. Thus, as organizations grow larger and more complex,
they tend to spend more and more time pouring over the easily-accessible records
of their financial health and less and less time looking after the unseen intangible
assets that generate that health.

To remain
viable over the long haul, organizations need more than financial solvency;
they need “intangible” solvency. It behooves them to pinpoint the people who
supply imagination and goodwill and to foster symbiotic relationships with those
people.

When relationships
of mutual advantage deteriorate, intangible assets dry up and organizational
health declines. Organizations are then forced to expend scarce resources to
rebuild the intangibles they squandered. Sometimes they never recover.